10th Annual Survey of Site Selection Consultants: Economy on a More Continuous Growth Track

As in years past, Area Development asked the consultants who work with corporate clients to tell us about their clients’ facilities plans and priorities in making a location decision. Fewer than half (43 percent) of those responding to our 2013 Corporate Survey say they use the services of consultants so let’s find out which companies the consultants are serving and how the Consultants Survey responses align with the Corporate Survey responses.

The Consultants Survey Respondents
Slightly more than half of those responding to our 10th annual Consultants Survey say they work with durable goods manufacturers as well as distribution/logistics/warehousing firms. Nearly 40 percent also claim to work with nondurable goods manufacturers, and more than 20 percent have also been engaged in location and expansion projects for the financial services/insurance/real estate; data processing, software, and computer-related services; and life sciences and energy industries (Chart A).

About three quarters of the responding consultants say they provide their clients with location studies/comparative analyses as well as help with the site selection decision. Their other primary role is incentives negotiation and management, as per 69 percent of the respondents (Chart B).

The responding consultants’ clients are of varying sizes in terms of employment numbers. About a third say they work with companies having fewer than 100 employees, but 40 percent also say they work with firms that employ 1,000 or more people (Chart C).

Slideshow10th Annual Survey of Site Selection Consultants Results

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Chart A: Percentage of respondents who have worked on a location or expansion project in the following industries

Chart AA: High energy costs impacting clients’ facility plans

Chart B: Percentage of respondents providing the following services to their clients

Chart M: Foreign location projects consultants are working on are slated for the following regions (as a percentage of total new foreign projects)

Chart N: New facilities slated for Asia will be located in the following countries (as a percentage of total planned Asian projects)

Chart O: Types of new foreign facilities clients are opening (as a percentage of total new foreign projects)

Chart P: Most clients that expect to expand facilities plan to do so within

Chart Q: Most clients that expect to expand facilities plan to do so within

Chart R: Of those clients planning a relocation, the primary reasons for doing so

Chart S: Have seen an increase in the number of companies establishing foreign facilities as opposed to domestic ones over the last year

Chart T: Clients have relocated a facility back to the U.S. from a foreign location

Chart U: Issues preventing clients from spending more of their earnings on investment in U.S. facilities

Chart V: We also asked those taking our Consultants Survey to rate the site selection and quality-of-life factors that come into play in their clients’ location and expansion decisions as either “very important,” “important,” “minor consideration,” or “of no importance.” These ratings are shown in Chart V.

Chart V (continued): We also asked those taking our Consultants Survey to rate the site selection and quality-of-life factors that come into play in their clients’ location and expansion decisions as either “very important,” “important,” “minor consideration,” or “of no importance.” These ratings are shown in Chart V.

We also asked those taking our Consultants Survey to rate the site selection and quality-of-life factors that come into play in their clients’ location and expansion decisions as either “very important,” “important,” “minor consideration,” or “of no importance.” These ratings are shown in Chart V. We then added the “very important” and “important” ratings in order to rank the factors in order of overall importance, as shown in Chart W.

Chart W (continued): We also asked those taking our Consultants Survey to rate the site selection and quality-of-life factors that come into play in their clients’ location and expansion decisions as either “very important,” “important,” “minor consideration,” or “of no importance.” These ratings are shown in Chart V. We then added the “very important” and “important” ratings in order to rank the factors in order of overall importance, as shown in Chart W.

Chart X: Higher unemployment rates making it easier for clients to find the labor they need

Chart Y: Clients’ dependence on contract workers or contingent labor

Chart Z: Percentage of contract labor clients employ at any given time

The majority of respondents to our Consultants Survey (86 percent) say executive management at their client companies is significantly involved in the site selection process. Sixty percent also say their clients’ real estate departments are heavily involved, and nearly as many work with other client operations or business unit management (Chart D).

Half of the respondents say that most of the clients who ask them to perform a location search have already gathered preliminary data and narrowed down the geographic area in which they wish to locate. Only 25 percent say their clients expect them to make the location decision on their behalf (Chart E).

When asked about the effects of the slow economic recovery on their clients’ facility plans, the respondents to our Consultants Survey are very optimistic — more than half say their clients still plan to open new facilities/expand (Chart F), as compared to just 20 percent of the Corporate Survey respondents who gave that answer. Additionally, the responding consultants are slightly more confident the economy will achieve a more continuous growth track this year than the respondents to our Corporate Survey: 48 percent of the consultants say so (Chart G), whereas just 40 percent of the corporate respondents believe this will happen.

Clients’ Projections for New Facilities/Expansion/Relocation
A quarter of the respondents to our 10th annual Consultants Survey say their clients who plan to open facilities expect to do so within one year, while 60 percent say their clients have two-year plans (Chart H). The majority (62 percent) say their clients will open just one new domestic facility (Chart I).

Of the total new domestic projects with which the responding consultants are involved, 17 percent are slated for the South (Alabama, Florida, Georgia, Louisiana, Mississippi) and 14 percent for the Midwest (Illinois, Indiana, Michigan, Ohio, Wisconsin) (Chart J). These are about the same percentages cited by our Corporate Survey respondents. However, the consultants are working on greater percentages of projects than those planned by the corporate respondents for the South Atlantic (North Carolina, South Carolina, Virginia, West Virginia) — 14 percent of the consultants vs. 11 percent of the corporate respondents — and for the Southwest (Arizona, New Mexico, Oklahoma, Texas) — 15 percent of the consultants vs. 11 percent of the corporate respondents.

Chart KK: When site selecting, clients consider whether there are businesses performing similar activities to theirs in the area of search

Nearly 30 percent of the new domestic facility projects assisted by the responding consultants represent manufacturing plants, and just less than a quarter are warehouse/distribution facilities (Chart K).
Fully two thirds of the respondents to our Consultants Survey say their clients plan to open just one foreign facility, with only 4 percent saying their clients will open five or more (Chart L). For comparison’s sake, half of the Corporate Survey respondents say they plan on opening just one foreign facility, while 12 percent will open five or more.

The greatest percentages of the projects being worked on by the responding consultants are in Mexico (19 percent), Asia (18 percent), and Canada (16 percent) (Chart M). The Corporate Survey respondents are planning fewer of their total foreign facility projects for these regions and more for South America, with 20 percent planned by the Corporate Survey respondents but representing only 11 percent of the projects with which the consultants are involved.

When it comes to Asia, 35 percent of those Asian projects assisted by the consultants will go to China, 18 percent to India, and 15 percent to Malaysia (Chart N), more than twice the percentage the corporate respondents plan for Malaysia.

The responding consultants say about 40 percent of their new foreign facilities will house manufacturing operations and 15 percent will be warehouse/distribution facilities (Chart O).

Nearly 60 percent of those responding to our Consultants Survey claim that their clients who have expansion plans will execute them within two years (Chart P). And about half say their clients who plan to relocate facilities also have plans two years out (Chart Q).

Chart P: Most clients that expect to expand facilities plan to do so within

About two thirds of the responding consultants say those clients who are planning to relocate are seeking to lower their labor costs and also need to be in closer proximity to suppliers and/or markets served (Chart R). About half of the consultants, and a similar percentage of those responding to our Corporate Survey, say relocations are being planned in order to lower a company’s tax burden.

Nearly a fifth of the consultants claim to be seeing an increase in the number of companies establishing foreign facilities as opposed to domestic ones (Chart S). And while only 3 percent of the Corporate Survey respondents say they expect to locate a foreign operation back to the U.S., one third of the consultants say their clients have re-shored operations. About half these consultants say this is a result of rising foreign labor costs and costs of transporting supplies/products as well as product quality issues (Chart T).

Why aren’t the consultants’ clients spending more of their earnings on U.S. facilities? More than 60 percent say it’s because of economic instability in the United States; more than half cite high corporate taxes; and about two fifths are concerned about excessive government regulations, including the impact of new healthcare regulations under the Affordable Care Act (Chart U). Our Corporate Survey respondents voice similar concerns.